ASOS Downgrades Profit Guidance After Slow November

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By Published On: December 19, 20180 Comments

According to a trading update for the first three months of FY19, ASOS’ sales have been lower than previously expected.

ASOS has reportedly lowered its sales forecast for the rest of the financial year after experiencing “a significant deterioration in the important trading month of November”. The business has reported that its solid 14 percent growth in sales over the quarter hasn’t been enough to offset its slow trade in the lead up to the busy festive season.

“We achieved 14 percent sales growth in a difficult market, but in light of significant downturn in November, we think it’s prudent to recalibrate our expectations for the full year,” said ASOS’ CEO, Nick Beighton. “We are taking all appropriate actions and our ambitions for ASOS have not changed,” he continued.

The business’s revised guidance is now predicting sales growth of 15 percent, down from earlier projections of 20-25 percent, while its retail gross margin predictions are now -150bps, where it was previously expected to sit flat at 49.9 percent. According to Beighton, sales in September and October were broadly in line with the business’s expectations but November disappointed on all fronts. In its trading update, the company said that “the current backdrop of economic uncertainty across many major markets, together with a weakening in consumer confidence has led to the weakest growth in online clothing sales in recent years.”

ASOS has also said that it has fallen victim to increased discounting activities and unseasonably warm weather in the last few months. This has reportedly driven higher variable costs through the company’s distribution and warehouse cost lines. 

When news of the profit downgrade broke on Monday, shares in ASOS toppled by nearly 40 percent.

However, it wasn’t all doom and gloom for the business, with sales for the quarter growing by 14 percent on a reported basis and 13 percent on a constant currency basis. ASOS also reportedly received 17.1 million orders over the three-month period, representing a growth of 16 percent year-on-year.

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